Finding A Comfort Zone…

  • December 19, 2013

Yesterday was a wild ride for the Bond Market. After almost six months of speculation the FOMC finally announced a taper timeline. The Fed will reduce bond purchases by $5 billion for both Treasuries and MBS.  After the dust settled, the market opened down as investors found their footing. Today, the number of people filing for Jobless Benefits jumped to 379k, coming in 42k over forecast. Don’t get too excited, the Labor Department stressed the long term trend continues to improve and the Initial claims remained flat. This tempered the effect on the market this morning. Philly Fed Survey, which measures manufacturing activity, rose half a point to 7.0 today.  New orders rose almost 4 points to 15.4 suggesting the economy continues to expand and improve.  Nothing too shocking here. GDP will be announced tomorrow, however economists do not expected a significant movement from the last reading. Hopefully, we can take tomorrow nice and easy. I am still tired from all the excitement yesterday! Let’s hope the market volatility subsides and we can finally settle into our new comfort zone. By Lindsey Fediuk, Quicken Loans Capital Markets Analyst

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Tapering and Tightening…

  • December 18, 2013

Tapering and Tightening… The Fed finally did it. I almost can’t believe it. After weeks of strong economic data, the Fed finally announced they will begin to taper bond purchases. Let’s break it down…this is so exciting. To recap, the Fed has been buying Treasuries and Mortgage Backed Securities to keep interest rates low and fuel the economy.  They called it Quantitative Easing. Recently, economic data indicated the economic recovery was gaining momentum. The taper talk increased and investors prepared for the announcement. Ben Bernanke had us guess for months now and investors grew anxious. Then it happened. Today was the big day. It’s taper time…let’s break it down. First, let’s define “taper.” The Fed will reduce bond purchases by $5 billion a month. What’s $5 Billion amongst friends? The market responded, and prices of mortgage backed bonds plummeted. However, after a few minutes the market rebounded and investors seem to be taking the news well. The Fed needs to pump money into the economy to generate job growth, but not too much money where it would cause prices to rise. It’s a delicate balance, but fear not, the Federal Bank will be watching. Bernanke defended the tapering decision stating…

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Addicted to Data…

  • December 17, 2013

Ever since Ben Bernanke claimed the decision to taper bond purchases would be dependent on economic data, the market has been addicted to every news release. I wonder if he knew such a small phrase could command such attention.   Ever since the market has become more volatile, reacting to every data point in fear bond tapering will begin. That could all end tomorrow… hopefully.  I know I have said it before, but this time I’m serious. Ok, let’s do one data point. This morning the NAHB Housing Market Index rose four points in December and Current Sales Index rose six points indicating the housing industry will continue to improve. This week, every economic data point is dwarfed by the FOMC announcement tomorrow. Investors appear to be comfortable with a taper announcement. However, if we don’t get a definitive answer from Bernanke we could see some big swings in mortgage rates. We just need an answer, Ben! In other news, yesterday Fannie Mae and Freddie Mac increased their Loan Level Price Adjustments to better align pricing with the associated risk. This means depending on your FICO score and LTV, Fannie and Freddie will charge you more to insure your 30 year…

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Game Day…

  • December 16, 2013

It’s a big day today here on the Trade Desk. This is pretty big. We have been waiting for this all season. Monday Night Football has finally come to Detroit! What did you think I was talking about? The FOMC meeting?  That’s Wednesday… We have Lions fans all over the city ready to see a good game. It’s a must win for the hometown team. But, before we head out let’s review last week’s bond market and get ready for the game week ahead. Let’s start with some game film. Last week we started off in positive territory after a strong employment report. Rates went down. However, by Tuesday afternoon we lost most of our positive momentum and rates increased. Lack of economic data and weak trading levels made for one uneventful close to the week. This week’s calendar is a different story. The must see is the FOMC meeting and announcement on Wednesday. Investors are looking for any indication of future economic policy. If the Fed deviates from the game plan of January tapering we could see a big move in the bond market. Hopefully, they won’t call an audible. We have a lot of news coming out before…

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Can You See The Weekend Yet?

  • December 13, 2013

This week dragged on and on, didn’t it? No economic news has made for a long week. I am sure everyone is filling the time with holiday parties and late night gift wrapping. I, for one, am exhausted from all the frivolity.  Actually, I think the Bond Market is a little tired too. I better grab a cup of coffee because it’s time for the weekly recap. Let’s break it down … MBS rallied early in the week following a strong employment report. This is paradoxical in many ways, but the increased buying from late in the week carried us through positive territory. What does this mean to you? Mortgage rates went down. We might have started the week a little too strong. At the opening bell Tuesday, the market improved again despite the FHFA announcing an increase in guarantee fees effective April 1st. This means the cost of an insured mortgage will increase come April 1st. If you want to avoid the fee, close your loan prior to that date. Hurry! Wednesday we hit a lull in the economic calendar. However, there was a short lived rally when Mel Watt was confirmed as the new head of the FHFA. …

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Judgement is All Around Us…

  • December 11, 2013

Yesterday was a quiet day in the mortgage bond market, but a big day for me. I bought my first Christmas tree. I caved. I was not going to participate this year; however I had judgments raining down on me from friends and family members. I felt like Janet Yellen defending her confirmation before the Senate. Actually, judgment seems to be the theme of the day… No significant economic data was released today.  That leaves a lot of time for investors and politicians to kibitz and speculate about tapering and federal budgets.  Investors are betting the budget deal floating around Washington indicates the Federal Reserve might start to scale back its economic support. Mortgage rates lost some ground today after the 10-Year Treasury auction this afternoon. These large auctions lured investors away from the mortgage market and caused bond prices to fall.  Investors looked at their lives, looked at their options…and they chose Treasuries today. The Senate finally came to a verdict on Mel Watt, a Democrat from North Carolina. He was confirmed as the new FHFA Director.  This could mean changes in future policy like increasing mortgage fees but, he has been quiet about his plans. Tomorrow Jobless Claims…

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Why Didn’t I Get A Snow Day?

  • December 10, 2013

Some parts of the country are getting buckets of the white stuff just in time for the holiday season. Rates improved at the opening bell and continued into the morning trading hours. Almost like a snow ball rolling down a hill picking up momentum. Wholesale Inventories grew 1.4% in October. This is like black ice. It looks harmless but it’s sending us mixed messages. Inventories are up and it could drive economic growth but it’s not a good thing if no one is there to buy it. A potential budget deal is floating around Washington, which is strange since the debt ceiling expiration date is not in the immediate future. A Christmas miracle, maybe? The Senate debated the confirmation of Mel Watt to lead the Federal Housing Finance Agency today.  Although many Republicans will vote against the nomination, Democrats should obtain 51 votes to confirm the nomination. It’s looking good for Mel at the moment…even if he had to skate into the Capital today. Finally, guarantee fees were increased today. That means you will have to pay more monthly fees to insure your mortgage this spring. It’s like the FHFA is giving us the cold shoulder. Tomorrow is another quiet…

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An Exception To Every Rule…

  • December 9, 2013

An exception to every rule… Whenever I write about the bond market, I tend to be a little matter of fact: “bad news means good news for the bond market.”  Bob Walters tells me every time, “careful with that strong wording! There is never a clear cut cause and effect in financial markets.” I know this; there is an exception to every rule. I knew one day I would be proven wrong.  Well, on Friday was that day. The market rallied after the Employment Report came in stronger than expected. Wait, what? Typically, good economic news means bond prices decrease, increasing mortgage rates. Friday, investors had prepared themselves for a strong payroll number; actually they over compensated. Good news meant rates improved. I was wrong. I can admit it. This week is light on economic news; the only piece of relevant data is Retail Sales, which is released Thursday. This could mean there will be little volatility in the market this week…or maybe not.  See; I’m learning. James Bullard, a top Federal Reserve banker, stated today the Fed could announce a bond buying reduction as soon as the next meeting. This means the government will buy less mortgage backed securities,…

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What, No Taper Tantrum?

  • December 6, 2013

It’s Jobs Friday! The employment situation report was released this morning. Jobs Friday is known for being a very volatile day in the bond market. This would seem to be especially true after Janet Yellen claimed the taper timeline was dependent, at least somewhat, on the employment rate. Last time employment data beat economists’ forecast the market had a taper tantrum. That’s right, investors got uncomfortable, lost it for a second and the market sold off significantly. Today it looked like it would be a repeat performance…but it wasn’t. In this morning’s report, the U.S. unemployment rate dropped to 7 percent in November, a five year low. Now that could have been something to yell about. After we all counted to 10, we cooled off, and the market started to bounce back. Nonfarm payrolls expanded, more than expected at 203,000 jobs last month. We put ourselves in time out for a few minutes to think about that. Charles Plosser, the president of the Philadelphia Fed, stated today the payrolls data reinforced his view that the Central Bank should begin to taper its bond buying program. Comments like this could give us insight to future economic policy changes. Tapering could mean…

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